OrotonGroup : 22/09/2016 - FY16 Investor Presentation

FY16 INVESTOR PRESENTATION

22 September 2016

CEO/MD - Mark Newman CFO - Vanessa De Bono

1

Strong Net Profit and Dividend Growth as We End Second Year of Transformational Change

FY16 Reported $ M	FY15 Reported $ M	Change %
Revenue	136.4	132.0	+3%
Gross Margin (%)	60.1%	60.7%
Total Expenses (%)	55.9%	56.9%
EBITDA (3)	12.9	10.9	+19%
EBIT	6.2	5.6	+10%
EBIT Margin (%)	4.6%	4.3%
NPAT	3.4	2.6	+31%
EPS (cents)	8.4	6.4	+32%
DPS (cents) / Fully franked	9.0	6.5	+38%
Net Cash / (Debt)	2.8	(5.8)
ROCE (4)	14.7%	9.6%
FY16 $ M	FY15 $M	Change %
Underlying EBIT (1)	7.9	6.8	+15%
Underlying NPAT (1)	4.6	3.8	+22%
Underlying EPS (cents) (1)	11.4	9.3	+22%

• Group Revenue up 3% to $136.4m

  • Strong growth in first half continued in third quarter, last quarter impacted by soft retail environment

  • Group like for like (LFL) sales were +2% in FY16

  • Oroton brand LFL sales growth of +1% for year with strong H1 partially offset by soft retail environment in H2 and exit of non core categories

  • Gap LFL +6% as brand awareness increases

• Gross margin decline 60bps to 60.1%

  • The Group has largely offset the continuing downward pressure from the AUD weakening relative to the USD with a conservative hedging policy and retail price increases

1. FY16 Underlying results are reconciled to IFRS audited measurements through the add back of store asset impairments totalling $1,643,000 net of the related tax effect where applicable.

   FY15 Underlying comparatives are reconciled to IFRS audited measurements through the add back of the onerous Hong Kong Store lease after exit ($832,000), the closure of the Singapore office ($189,000) and the trading losses ($1,827,000) and gain on exit ($1,655,000) from Brooks Brothers Australia. Underlying comparative add backs total $1,193,000.

2. Underlying HY15 comparatives were changed to be consistent with the FY15 year end presentation by adding back the trading losses from Brooks Brothers Australia joint venture ($1m) following the exit in July 2015

3. EBITDA is Earnings Before Interest, Tax, Depreciation, Amortisation and Impairment

4. Return on Capital Employed (ROCE) calculated as: EBIT / (Total Assets - Current Liabilities)

• CODB improved by100bps to 55.9% of sales (FY16: 56.9%) due to reduced warehouse, distribution and admin costs and retail costs contained, whilst still increasing investment in marketing
• Underlying EBIT improved +15% (1)

  • Underlying earnings in first half of +8% (2) accelerated in second half to achieve +15% in FY16

  • Increased revenue together with constant currency gross margin dollar growth, reduced CODB and reduced losses from International and GAP, were offset by approximately $1.7m foreign currency impact

• EBIT increased to $6.2m or +10%

  • Reported EBIT growth lower than underlying EBIT (1) after accounting for non- cash asset write-downs of $1.6m to address store location issues

• Underlying EPS up 22%(1)

  • EPS growth higher than EBIT growth, as current effective tax rate improves with less non-deductible international losses and financing charges reduce 40% with improved cash position

• Strong Balance Sheet and $2.8m cash to support growth initiatives
• DPS of 9.0 cents fully franked (+38% vs FY15)

  • The Board has declared an increased final fully franked dividend of 3.0cps (FY15: 2.0cps) taking the full year fully franked dividend to 9.0cps (FY15: 6.5cps) with an underlying payout (1) of 79% (FY15: 70%)

    Oroton - 2nd year of re-positioning and strengthening of the brand

• LFL sales for full year of +1% compared to -6% in FY15

  • Strong sales performance in first half, continued into Q3 but lower LFL sales in Q4, due to a soft retail environment and lower inventory of exiting categories of apparel and shoes

  • Women's handbags driving higher growth in full priced stores and online, with unit volume and average transaction value up on flat traffic growth

• Product innovation and development continues with:

  • New Designer in place for Summer 16, with the launch of our first "Resort" collection

  • A focus on core women's handbags, wallets and men's accessories

  • More opening price point styles

  • Expanded higher price Limited Edition options

  • Launch of fragrance and updated jewellery and watch ranges from Summer 16

  • Introduction of personalisation and customisation options

  • Exiting non core categories of apparel, shoes and lingerie

• Increased marketing investment continues with:

  • Further investment in CRM platform to deliver better customer insights and loyalty

  • Focus on digital, content creation and brand partnership

  • Social first, with strong growth in following and engagement

Oroton - New store concept roll out and International rationalisation

• Further roll out and refining of new store concept and improved in-store experience:

  • Achieving higher sales/m2, average transaction value and

    average selling price in new concept than old concept stores

  • Focus on in-store experience through 'clientelling' program

  • Bricks store network rationalized further with closure of marginal non performing stores as traffic shift to online continues

  • Closed 6 international and 2 domestic stores during this half

  • Total store network 63 at year end compared to 71 at end of HY16 and FY15

• International losses halved to ~$1.9m (FY15: ~$3.7m):

  • Closed loss making stores and Singapore office over the last 2 years

  • Closed 1 Malaysia store in August 15 and 1 China store in May 16

  • Exited all Malaysia/Singapore department store concessions by May16

  • Underlying International losses reduced to ~$1.7m (FY15: ~$2.7m) after removing the impact of non cash asset write-downs in FY16 and onetime costs in FY15 associated with the closure of the HK store and Singapore office

  • We continue to focus on eliminating losses in this channel

  • Total number of International stores at FY16 was 8 (HY16: 14, FY15: 15)